Demand for Xbox Live Drives Microsofts Revenue

By Peter Galli  |  Posted 2006-04-27 Print this article Print

The company is also forecasting a rosy year ahead, predicting the next fiscal year will deliver even stronger double-digit revenue growth than this year.

Microsofts revenue rose 13 percent to $10.9 billion in the third quarter to end-March 2006 from the same period a year earlier on the back of a surge in demand for newly released products, especially the Xbox 360 system. Operating income for the quarter rose 17 percent to $3.89 billion from the $3.33 billion in the prior-year period, benefiting partly from a large reduction in legal costs to $397 million over the quarter compared to $768 million in the prior-year period.
Net income came in at $2.98 billion for the quarter, with diluted earnings of 29 cents per share, which included 3 cents of legal charges.
That compares with net income of $2.56 million for the same quarter of the previous year and diluted earnings of 23 cents a share, of which 5 cents was for legal charges. Home and Entertainment revenue was up more than 80 percent on strong demand for the Xbox 360 system; Microsoft Business Solutions notched up 21 percent in revenue growth on continued interest in the Microsoft Dynamics line of business management solutions, said Chris Liddell, Microsofts chief financial officer, in a statement released after the financial markets closed in New York on April 27. "This quarter marked the 15th consecutive quarter of double-digit revenue growth for the server and tools business, with Microsoft SQL Server revenue up more than 30 percent over the quarter," said Kevin Johnson, the co-president of Microsofts platforms and services division, in a statement. Click here to read more about the release of Service Pack 1 for SQL Server 2005. Microsoft is also forecasting a rosy year ahead, with Liddell saying the company believes the next fiscal year will deliver "even stronger double-digit revenue growth than this year. Given our confidence in the future, we have also continued our momentum on buyback execution, acquiring $4.9 billion of our stock during the quarter," he said. Microsoft management is also forecasting revenue for the next quarter, ending June 30, 2006, to be in the range of $11.5 billion to $11.7 billion, with operating income likely to come in at $4.0 billion to $4.2 billion and diluted earnings per share expected of 30 cents. For the full fiscal year ending June 30, 2007, managements guidance is that revenue is likely to be in the range of $49.5 billion to $50.5 billion, with operating income of $18.7 billion to $19.3 billion and diluted earnings of $1.36 to $1.41. Check out eWEEK.coms for Microsoft and Windows news, views and analysis.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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